US rocked by financial scandals
The US economy has been rocked by a never-ending series of financial scandals since the latter part of 2001. They mainly involve accounting anomalies and deception of the public as well as the stockholders of some of the biggest corporations in the US.
The latest in the series of scandals is the case of WorldCom, the second biggest telephone company in the US and the number one internet company worldwide. It was revealed on June 25 that WorldCom had withheld from its stockholders $3.8 billion in company expenses since the previous year. The amount was misrepresented by company bosses as capital expenditures.
It has now come to light that the company has been incurring heavy losses, contrary to its public image. As a result of the controversy, the price of company shares fell from $64 to $0.21. If things come to a head, WorldCom can end up incurring the biggest bankruptcy ever in US history. Even now, 17,000 or about 20% of its workforce worldwide, have been laid off by the company. There are also concerns that WorldCom�s collapse could have possible security implications since the telecommunication requirements of strategic government agencies, including the Pentagon and the State Department, all depend on the company.
Aside from WorldCom executives, one of the main culprits is Arthur Andersen, WorldCom�s accounting firm during the period in question. Arthur Andersen was also involved in the case of Enron, an energy company and the seventh biggest corporation in the US as well as the 16th largest worldwide before its collapse.
The series of scandals began when it was revealed in October 2001 that Enron executives had been trying to cover up the company�s true financial status through fraudulent accounting in order to raise the price of its stocks. The giant corporation went bankrupt and was saddled with debts due to massive and systematic embezzlement by its executives. Recently, Arthur Andersen was convicted of obstruction of justice due to its destruction of documents that would have served as evidence against Enron.
Also implicated in the Enron case is the George W. Bush administration. Company chair Kenneth Lay was known to be close to the president. He was the fourth biggest contributor � pouring in $623,000 � during the Bush presidential campaign. Thirty-five officials of the Bush administration have also been reported to have big shareholdings at Enron, with some having served as consultants to the corporation. In exchange, Enron became influential in drafting the energy policies of the current US government. It is also believed that the White House has had a hand in covering up the anomalies that have transpired at Enron.
WorldCom is the 10th big US corporation to be involved in a financial scandal since the Enron case erupted. The other companies are Tyco, Rite Aid, Merrill Lynch, Waste Managememt, Cendant, Sunbeam, Global Crossing and Adelphia Communications. The latest cases to be exposed are those of Xerox, Apple Computer and Walt Disney.
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